ML20127J083
| ML20127J083 | |
| Person / Time | |
|---|---|
| Issue date: | 11/13/1992 |
| From: | Taylor J NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO) |
| To: | |
| References | |
| FRN-58FR3515, FRN-58FR3516 AE16-1-014, AE16-1-13, AE16-1-14, SECY-92-385, NUDOCS 9211190153 | |
| Download: ML20127J083 (57) | |
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%.....p RUL$ MAKING ISSUE November 13, 1992 SECY-92-385 Lon The Commissioners From: James M. Taylor Executive Director for Operations Subiect: PROPOSED RULE, 10 CFR PARTS 30, 40, 50, 70, AND 72, "SELF-GUARANTEE AS AN ADDITIONAL MEANS OF COMPLIANCE WITH THE COMMISSION'S DECOMMISSIONING FINANCIAL ASSURANCE REGULATIONS"
Purpose:
To obtain Commission approval of the publication of the subject proposed rule in the freieral Reaister.
Di m ssioni On May 12, 1992, the staff submitted SECY-92-174 to the Commission. This paper outlined the issues involved in resolution of the petition for rulemaking (PRM-30-59) submitted by the General Electric Company and the Westinghouse Electric Corporation. The petition requested that NRC amend its decommissioning regulations containef in 10 CFR Parts 30, 40, 50, 70 and 72 to provide a means for self-guarantee of decommissioning funding by certain NRC _
.censees who meet stringent financial standards and related reporting and oversight requirements. The request excluded electric utility licensees under Part 50, since the current 10 CFR 50.75 permits electric utilities to build up their decommissioning fund over the life of the reactor in an external sinking fund.
The Commission's dec hion, contained in the Staff 4-8equirements Memsandum (SRM), Samuel J. Chilk to James M.
Taylor, dated August 12, 1992 (Enclosure li, was to grant ,
the petition, incorporating certain changes to the proposed 3100 d V' 10 CFR Part 30, Appendix B and including a requirement for annual recertification. The SRM also requested that the
- Federal Register Notice for the proposed rule solicit public ichard req NOTE: TO BE MADE PUBLICLY AVAILABLE 301-492-3734 WEN M MAL SM IS NE AVAILABLE pc-b a1 3'0 l 9 0 ( i, M~NE4 1
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4 The Commissioners 2 comme.its on deleting the $1 billion net worth requirement from the financial test requirements. The enclosed draf t Federal Register Notice (Enclosure 2), incorporates these requests.
Eqordination: The Office of the General Counsel has reviewed this Commission Paper and has no legal objection. Resources needed to carry out this action are being included in the FY 93-97 five-Year Plan, Recommendation: That the Commission:
Approve: Publication of the draft proposed rule in the Federal Reaister.
Certify: That this proposed rule will not have a significant economic impact on a substantial number of small entities in accordance with the Regulatory Flexibility Act.
Note:
- 1. This proposed rule contains a 09w information collection requirement subject o the Paperwork Reduction Act of 1980 (44.U.S.C 3501, et seq.).
- 2. The appropriate Congressional Committees will be informed by the enclosed draft letters (Enclosure 4).
- 3. The Office of Public Affairs has preoared a draft public announcement (Enclosure 5).
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Enclosures:
- 1. SRM dated 8/12/92, SECY-92-174
- 2. Draft Federal Register Notice
- 3. Draft Regulatory Analysis !
- 4. Draft Congressional Letters
- 5. Draft Public Announcement
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Commissioners' comments oriconsent should _be:provided-.directly.
to the. Office of-the_ secretary by-COB Tuesday,' December-1,r1992; commission Staff. Office commento, if any,.should be submitted-to the Commissioners NLT' Monday, November-23i.1992, with an;infor--.
I mation copy'to.the Office _of the Secretary. If the_ paper is of; . ,
such a nature that it requires additional review and-comment,=the
- Commissioners and the Secretariat _should be apprised of.when comments may be expected.
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- ' NUC 2AR REGULATORY COMMISSION Cys: Taylor I
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oprict or t g August 12, 1992 Blaha Bernero, H s Scroggins, yC ,
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DMeyer, AD MEMORANDUM FOR: James M. Taylor Executivo Dtructor f0r o ations FROM: E el J. Ct' ilk, Secret
SUBJECT:
SECY-92-li4 " AESPONSE ' j3ENEPAL SLECTRIC AND WESTINGHJUSE PETITIt FOR ROLM AKING TO ALLOW SELP C',ARANTEE AS AN ADDITIONEL MEANS FOR COMPLIA.CE WITH DECOMMISSIONING i REGULATIONS 1 The Commission (with all Commissioners agreeing) has disapproved-the staff's recommendation to deny the petition. The petition for rulemaking should be granted incorporating the attached changes to 10 CFR Part 30, Appendix B, and including the requirement for annual recertification as stated in paragraph II.B.(4). The revised rederal Reaister notice should be forwarded for Commission review prior to publication.
-( EIX>) - (RES) (SECY Suspense: 10 /92) 9100030 l , l' -
9 In addition, the Federal Rgpister notice should solicit comments on whether the Commission should consider deleting the financial test requirement for a tangible not worth of at least $1 billion.
The final analysis should be included in the final rule package' !
when it is submitted to the Commission for review.
-f EDO)- (RES) (SECY Suspense: 4/15/93) 9100030
Attachment:
As stated 1
cc: The Chairman
, Commissioner Rogers
! Commissioner Curtiss Commiss C er Remick Commissioner de Planque OGC OCAA OIG SECY NOTE: THIS SRM, SECY-92-174, AND THE VOTE SHEETS OF ALL COMMISSIONERS WILL BE MADE PUBLICLY AVAILABLE 10 WORKING DAYS FROM THE DATE OF TNIS SRM l
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- 1. Introduction An applicant or licensee may provide reasonable assurance of the availability of funds for decomissioning based on furnishing its own guarantee that funds will be available for decomissioning costs and on a demonstration that the company passes the financial test. This appendix establishes criteria for passing the financial test for the self guarantee.
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- 11. Financial Test A. To pass the financial test, a company must meet all of the following:
(1) Tangible net worth of at least 51 billion. Ma l (2) Tangible net worth at least 10 times the3 current decomissioning cost estimate [orthecurrentamountrequiredifcertificationisused.
(3) Assets located in the United States amounting to at least 90 percent of total assets c; at least 10 times th$ current decomissioning cost estimateg l
or the current amount required if certification is used.
(4) A current rating for its most recently issued bonds of AAA, AA, or A as issued by Standard and Poors (S&P), er Aaa, Aa, or A as issued by Moodys.
B. Additional requirements (1) The company must have at least ore class of equity securities registered under the Securities Exchange Act of 1934.
(2) The company must provide the Comission with copies of all reports filed with the Securities and Exchange Comission under Section 13 of the Securities Exchange Act of 1934.
(3) The company's independent. certified public accountant must compare the data used by the company in the financial test with the company's independently audited yearend financial statements.
(4) The company must repeat passage of the test within 90 days after the close of each succeeding fiscal year.
(5) The company must notify MRC within 90 days of any matters coming to the attention of the auditor that cause the auditor to believe that the data specified in the financial test should be adjusted and that the company no longer passes the test.
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[7590-01]l NUCLEAR REGULATORY COMMISSION 10 CFR Parts 30, 40, 50, 70, 72 RIN 3150-AE41 Self-Guarantee As An Additional Financial Assurance Mechanism AGENCY: Nuclear Regulatory Commission.
ACTION: Proposed rule.
SUMMARY
- The Nuclear Regulatory Commission:is proposing to amend its regulations for decommissioning licensed facilities to allow certain non-electric utility licensees to use self-guarantee as a meanslof financial assurance. The proposed rule would reduce the cost burden of financial assurance while providing NRC 'with' sufficient assurance that decommissioning costs will-be funded. This proposed rule respond: to a petition for rulemaking (PRM-30-59) from General Electric Company and Westinghouse ' Electric
- Corporation.
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' DATE: Comment period expires ( insert d, ate l75 days >after, publication).
Comments received after this date will be considered .if it. is' practical to-do so, .but the Commission is able to assure consideration onlycfor comments .
received on or before this date, 1 ENCLOSURE-2, I
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ADDRESSES: - Mail written comments,to: Secretary, U.S. Nuclear Regulatory-
. Commission, Washington, DC, 20555, Attention:-- Docketing and Service.B_ ranch.-
Deliver comments to: 11555 Rockville Pike, Rockville, Maryland, between 7:45 am and 4:15 pm Federal workdays.
Copies of the regulatory analysis and comments received may be examined at: The NRC Public Document Room, 2120 L Street, NW. (Lower Level), ,
Washington, DC.
FOR FURTHER INFORMATION CONTACT: Clark Prichard, Office of Nuclear Regulatory ~ I l1 Research, U.S. Nuclear Regulatory Commission, Washington, DC 20555, telephone' ?
(301) 492-3734, c
' SUPPLEMENTARY INFORMAT10N:
Background-On September 25, 1991 (56 FR 48445),-the NRC-published an 'otice of-receipt of a petition for rulemaking from the General Electric-Company 1(GE)- _
and the Westinghouse' Electric Corporation (Westinghouse).- The petitioners requested that the NRC amend its decommissioning regulations; contained in 10 CFR Parts 30, 40, 50, 70, and 72 to provide a means. for self-guarantee of decommissioning funding costs by certain NRC licensees who meet stringent 4 : financial standards and related reporting and oversight requirements. The petitioners proposed that electric utility reactor licensees'under 10 CFR Part 50 not be affected by the. proposals in the petition.
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2 ENCLOSURE 2
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1 On June 27,1988 (53 FR 24018), the NRC published a final rule that' established general requirements for decommissioning nuclear facilities.
These requirements provide assurance that licensed facilities will be decommissioned in a safe and timely manner and that adequate funds will bei available for decommissioning. Under the present decommissioning regulations,-
licensees are permitted to provide financial assurance for decommissioning funding through prepayment, insurance, a surety bond, a letter of credit, a ,
parent company guarantee, or for electric utilities,- the establishment of an external sinking fund, in 1990, GE and Westinghouse requested exemptions from the financial assurance requirements for decommissioning. The requested exemptions would have permitted GE and Westinghouse to demonstrate financial assurance for decommissioning by submitting a self-guarantee that otherwise met or exceeded the criteria for qualifying parent company guarantees under Appendix A to
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10 CFR Part 30. The Commission denied the requests for exemption. Later in 1990, GE and Westinghouse each submitted a' petition for reconsideration of their requests for extmption. These requests for reconsideration were also denied. However, in informing GE and Westinghouse of the denial, the Commission indicated a willingness to consider a petition for rulemaking from GE and Westinghouse.-
The GE/ Westinghouse petition was docketed on July-11, 1991 (PRM-30-59).
The petition requested that Parts 30, 40, -50, 70, and 72 be amended to allow corporate self-guarantee as an additional method of complying with financial assurance for decommissioning requirements in those parts. The petition proposed criteria for corporate self-guarantee which would assure that only 3 ENCLOSURE 2 3
veryL strong financial entities' could qualify. The financial- criteria.which-were proposed are:
(1) Tangible net worth of at-least $1 billion.
(2) Tangible net worth at least 10' times the current decommissioning cost estimate, or the current amount required if certification is:used.
(3) Assets located in the United States amounting to at least 90 percent of total assets or at least 10 times the current decommissioning cost estimate, or the current amount required if certification is used. -
(4) A current bond rating of AAA, AA, or A as issued by Standard and Poors (S&P), or.Aaa, Aa, or A as issued by Moodys.
A number of procedural requirements were also _ proposed:
(1) The company must have at least one class of equity securities registered under the Securities Exchange Act of 1934.
(2) The company will provide the Commission with copies of all. reports filed with the Securities and Exchange Commission under Section 13 of the Securities Exchange Act of 1934.
(3). The company's independent certified public accountant must compare the data used 'ay the company in the financial test with the company's-
-independently audited yearendLfinancial statements.
(4). The company must repeat passage of the test within 90 days after-the close of each succeeding [ fiscal year.
(5) _ The company must notify NRC within 90 days of any matters coming' to-the attention of the auditor that cause the auditor to believe that the data specified in the financial test should be -adjusted.and that.the company no-longer passes the test.
4 ENCLOSURE 2.
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The self-guarantee would be availabic 'only for an applicant or' licensee-having no parent company holding majority control of its_ voting stock.
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Basis for Petition i
The petitioners believed that they have been adversely and unreasonably' affected by limitations in the current decommissioning regulations. Companies-such as the petitioners are unable to guarantee decommissioning funding if they themselves are the licensee. However, relatively weaker financial-institutions, such as banks, insurance companies, and savings and loans',-are. .
permitted to guarantee decommissioning funding for licensees without ~providing any evidence of financial' strength.
Furthermore, licensees without the financial strength of the petitioners may provide qualifying parent company guarantees solely because these parent companies are legal entities distinct from the-subsidiary licensees'whose decommissioning-funding they guarantee.
The petitioners asserted that the lack of an internal decommissioning funding method imposes unwarranted compliance costs upon-them. The: current ,
regulations compel the petitioners to either-restructure their licensed activities--into less financially secure subsidiaries for which they could then; provide a parent cenpany guarantee, or to purchase outside financial' assurance.
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5 ENCLOSURE 2:
Public Comments-The Commission received five comment letters.in response to the publication of the~ notice of receipt of.the petition. Most of-the letters supported a revision of the Commission's regulations to allow self guarantee. ,
Three large materials licensees supported self guarantee, although they~.
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favored less stringent financial criteria for self guarentee so that a wider-range of licensees could qualify f to use self guarantee. One large materials
-licensee prefers that the tangible net worth requirement should be ten times the estimated decommissioning costs, or in the case of licensees with multiple .
facilities requiring decommissioning, $500 million to $1 billion depending on the number of such facilities. Another large caterials licensee suggests that NRC use the same financial requirements now applicable to parent company guarantees. It does not see any need to make the tangible net worth criterion ,
any higher than-$50 million. .The minimum bond rating requirement should be BBB or Baa, the lowest rating still considered investment grade. Also, in .[
their opinion, the financial ratio tests in' Appendix A to 10 CFR Part.30?
should be retained as an alternative to the bond rating criterion. Finally, this commenter does not believe that the more restrictive tangible net worth / decommissioning cost ratio proposed in the petition is justified.
Another large materials licensee-asserts that tnere 'is no rational basis 1for.
1 establishing criteria for a company self-guarantee which differ signifi.cantly from existing criteria for the parent company guarantee. In either instance, the adequacy of the financial assurance requirement provided-is based on the L value of the assets securing the decommissioning obligation. According to-
! this commenter, if the assets are. held in two separate pools, each technically; 6 ENCLOSURE 2 L
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owned-by a different but related company,Jthe' level of financial security-In virtually all provided does not increase in any significant measure.
' instances where the parent guarantee is utilized, the subsidiaries lare wholly.
or substantially owned by the parent such that the- financial and other elements of the two entities are substantially the same. As an alternative, this commenter recommends that the NRC adopt the petitioners' proposal,--
modified by reducing the minimum tangible net worth requirement to at most
$100 million, and requiring a bond rating not lower than= BBB oor Baa.
An electric utility licensee opposes the petition's exclusion of the-electric utility reactor licensees under 10 CFR Part 50. Its position is that decommissioning regulations should apply to all licenseesiequally and that compliance alternatives contingent on licensee financial status and size should also te available to utilities.
A commenter opposed self-guarantee, citing the potential for takeover and breakup of large corporations. This would mean that a company initially allowed to use a self guarantee by meeting the criteria, subsequently could.be substantially weakened through restructuring. The ability of the_ restructured ,
company to meet decommissioning costs could be in doubt.
-Response to Comments Several commenters favored the self guarantee concept but argued _ for less stringent financial criteria. The Commission-is interested-in-alternative financial criteria which wou'ld permit more licensees to use the proposed self-guarantee, yet would maintain a high level of financial 7 ENCLOSURE 2 r v .y- = g - , e a w a w -m-,-------+ s - , - - +
assurance. The Commission is asking for public comments on a possible alternative to the propased financial criteria (see Alternativa Criteria).
Regarding the comment concerning the exclusion of elettric utilities from the scope of the proposed self-guarantee, the Commission allows ~ Diectric utilitics to accumulato decommissioning funds in an external sinking fund.
Unlike other licensees subject to financial assurance requirements, electric utilities do not have to provide financial assurance "up front." Thus, electric utilities already are permitted a cost-reducing financial assurance mechanism.
In response to the comment that self-guarantee should not be allowed because of the potential for takeover and breakup of large companies, the Commission believes that the requirements for annual re-certification, combined with timely bond rating reviews, will be adequate to maintain the level of financial assurance of the proposed self-guarantee.
Basis for the Commission's Decision The Commission has carefully reviewed the arguments in the petition, as well as the public comments. For the reasons outlined below, it has decided to initiate this rulemaking, which, if promulgated as final. would grant the petition.
Stringent financial Criteria The financial criteria proposed for self-guarantee are exceptionally stringent.- - The CommissionLis confident that licensees able to moet the 8 ENCLOSURE 2 hw 'I'
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financial criteria provide the necessary reasonable assurance that funding will be available to meet decommissioning costs. The regulatory analysis estimates that only approximately 20 present NRC licensees could meet the criteria.
The criterion for tangible not worth, $1 billion, far exceeds that required for the NRC parent company guarantee ($10 million). In addition to the $1 billion tangible net worth requirement, the proposed rule would require that a licensee must have tangible net worth at least ten times the total current Jecommi sioning cost estimate for all decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor, or the current amount equired if certification is used. To assure that assets are within reach of the Commission's authority, 90 percent of total assets or at least ten times total decommissioning cost estimates for all decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor, or the current amount if certification is used, would need to be in the United States, in addition to tangible net worth criteria, the financial criteria include a bond rating of A or above. This bond rating is above that required -
to classify debt securities as " investment grade." The principai debt rating services, Moodys and Standard and Poors, classify bonds with a rating of Baa and BBB respectively, as " investment grade" as opposed to bonds with a lesser rating which are classified as " speculative grade." Bond ratings are reviewed often, and changed in response to changes in the issuer's financial condition.
A bond rating of A or better assures that the financial strength of a licensee offering a self-guarantee has been independently reviewed and affirmed. It provides an excellent guide to the ability of a company to meet its 9 El4 CLOSURE 2
ol,11gations . According to Moodys, default rates associated with companies whose bonds are rated A or above in 1 of the 3 years prior to default are 0,13 percent annually.'
1here could be concern that a self-guaranteeing licensee's financial condition could deteriorate over time, jeopardizing decommissioning funding.
. The proposed rule has the following safeguards against this possibility:
(1) A licensee using telf-guarantee would need to be re-certified each year as meeting the financial criteria, (2) Copies of all current financial reports filed with the Securities and Exchange Commission would also need to be provided to the Commission, (3) The company would nced to notify NRC within 90 days of any matters which could prevent the company from any longer passing the financial criteria, and (4) The company would need to notify NRC within r
20 days if its bonds are no longer rated- A or better. .
t Cost Savings ,
The objective of this proposed rule is to reduce the licensee's cost burden without adverse effects on public health and safety. The draft regulatory analysis developed for this proposed rule estimates that annual total cost savings would be approximately $600,000 for all licensees using the self-guarantee. This estimate is based on rather conservative assumptions
-(i~.e., $750,000 total- decommissioning cost per license); the actual cost
- _ savings may be considerably greater. Both the petition for rulemaking and- -
severalLpublic comment letters assert much greater cost savings.
'Cornorate Bond Defaults and Default -Rates, Moody's Special Report, -
h January 1991, p. 32.
10 ENCLOSURE 2
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I The cost savings would result from the elimination of the cost of third ,
party financial assurance for licensees qualifying to use the proposed self-t guarantee. Annual fees for letters of credit, surety bonds, and other forms
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of third party financial assurance typically are approximately 1.5 percent of-the amount of financial assurance provided. l Comparison with Parent Guarantee 7
The NRC currently allows licensees to comply with its financial assurance regulations by means of a parent company guarantee. The parent company of a licensee, if it meets the financial criteria in 10 CFR Part 30, Appendix A, may guarantee that funds will be available to decommission the facility of its subsidiary licensee. The parent company guarantee allowed in i
NRC regulations does not provide a greater degree of financial assurance ti.an ,
self-guarantee for a company meeting the criteria proposed here. Under r current regulations, there is no explicit regulatory requirement ti.at licensees using the parent company guarantee: (1) be wholly independent of ,
the parent company who-provides the guarantee and (2) demonstrate financial-qualifications in itself that are comparable to those required of a parent company guarantor under current regulations or those proposed for _self-guarantee in the petition. ,
A company which meets the financial criteria for_ the-proposed rule _ could readily pass the financial test in 10 CFR Part 30, Appendix A, and would thus.-
be eligible to-provide a parent company guarantee for a subsidiary. It is -
- anomalous-for NRC regulations to permit a large, financially-strong company to L provideaparentcompanyguarantee,butnotallowthatsamecompanytoproviddt l
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e a . sel f-guarantee. Moreover, a large, financially strong company-could carry ;
out a corporate restructuring to create a licensee subsidiary which could then e
be covered by a parent company guarantee.
EPA Precedent t
The Environmental Protection Agency (EPA) allows self guarantee as a f mechanism for meeting its financial assurance regulations for hazardous waste facilities (40 CfR Parts 264 and 265). The objective of EPA and NRC financial I assurance regulations is the same; to ensure that adequate funds are available li to safely decommission facilities. EPA has about 10 years of experience with .i self-guarantee to date (the final rule was promulgated on April 7,1982, .
47 FR 15033), and self-guarantee has been an effective financial assurance r
mechanism, i
Alternative criteria h The Commission notes that a majority of commenters on the petition questioned the need for the financial crit.eria for self-guarantee to be as .y stringent as proposed here. Allowing less stringent criteria would permit ,
additional licensees to use self guarantee and thus reduce the' costs of complying _ with the Commission's regulations. The draft regulatory analysis ,
indicates that one approach which could widen the range of eligible licensees - ,
would.be to-delete the $1 billion tangib'le net worth criterion.. A company's-tangible net worth is an important factor comprising its bond rating, and the ,
rating itself, combined with the other criteria,> may be a sufficient l indicator..
12 ENCLOSURE 2 A
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k Since all firms qualifying would need an A or better of financial stability. ,
bond rating, this alternative may not be riskier in terms of financial _ l assurance than the proposed rule. The craft-regulatory analysis examines the ->
effects of deleting the $1 billion tangible net worth requirement from the financial criteria in the proposed rule, all other criteria remaining constant. The conclusion is that this alternative, if adopted, would allow.an additional 7 firms, holding 11 licenses, to use the proposed self-guarantee. ;
The Commission is especially interested in public comments on this alternative financial criteria--the criteria in this proposed rule without the $1 billion.
tangible net worth requirement.
i Administrative Conforming Changes a
Sections 30.8(b), 40.8(b) and 50.8(b) are being revised to list al,1 the -!
regulatory provisions of these parts that contain' information collect %ns.
- Environmental Impact: Categorical Exclusion The NRC has determined that this proposed regulation is the type of action described as a categorical exclusion in 10 CFR-51.22(c)(10)(i).
Therefore, neither an environmental impact statement..nor an environmental
- assessment has been prepared for this proposed regulation. ,
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E Paperwork Reduction Act Statement This proposed rule amends information collection requirements subject to -,
the Paperwork Reduction Act of 1980 (44 U.S.C. 3501, et seq.). This rule has been submitted to the Office of Management and Budget for review and approval i
of the paperwork requirements. ;
The public reporting burden for this collection of information is .
estimated to average 19 hours2.199074e-4 days <br />0.00528 hours <br />3.141534e-5 weeks <br />7.2295e-6 months <br /> per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of-information. Send 2
comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to the Information and Records Management Branch (MNBB-7714), U.S. Nuclear Regulatory Commission, Washington, DC 20555, and to the Desk Officer, Office of information and Regulatory Affairs, NE08-3019. - (3150-0017, -0020, -0011,
-0009,-0132), Office of Management and Budget, Washington, DC 20503.
Regulatory Analysis-l The Commission has prepared a draft regulatory analysision .this proposed regulation. The analysis examines the costs and benefits of the alternatives 1 considered by the Commission. The draft analysis is available for inspection
- in the NRC Public Document Room. 2120 L Street, NW. (Lower level),
Washington, DC. Single copies of the draft' analysis may be obtained from- l Clark W. Prichard, Office of Nuclear Regulatory Research, U.S. Nuclear .
Regulatory Commission, Washington, DC, 20555 telephone (301) 492-3734.
14 ENCLOSURE l
- =
- $ W D T- 7T W Wf 9 ur- T- -T'*$ T .ws^"WW Fd'Mw'T'%-==t7-iur M ' #
- t'rF--f-*w +f t~ m e rW'w*==*c-'u
=f-458==P * *-M e*uu
- The Commission requests public comment on the draft regulatory analysis.
Comments on the ldraf t analysis may be submitted to the NRC as indicated under the ADDRESSES heading.
Regulatory Flexibility Certification In accordance with the Regulatory flexibility Act, 5 U.S.C. 605(b), the--
Commission certifies that, if promulgated, this proposed rule will not have a significant econcmic impact upon a substantial number of small entities. . The y proposed rule would affect only entities with a tangible net worth of $1 t
billion. The licensees affected by this proposed rule do not fall within the scope of the definition of "small entities" set forth in.the Regulatory Flexibility Act or the. size standards of the NRC applicable to a small business (56 FR 56671; November 6, 1991).
Backfit Analysis ;
- t The NRC has determined that the backfit rule, 10 CFR 50.109, does not apply to this proposed rule and, therefore, that a backfit analysis is- not l required for this proposed rule, because these amendments do not involve any provisions which would impose backfits as defined in 10 CFR 50.109(a)(1).
. List of Subjects
{ ;
15 ENCLOSURE'2 q E _.n, .- _ __.:m__. . . _ . _ , _ , , _ . - . _ . _ . _ , . - . . . . . _ . . _ . . . , _ _ , , - _ m__ -_
Byproduct material, Civil penalty, Government contracts, Intergovernmental relations,- Isotopes, Nuclear material, Radiation protection, Reporting and recordkeeping requirements.
10 CFR Part 40 Criminal penalty, Government contracts, Hazardous materials-transport, Nuclear materials, Reporting and recordkeeping requirements, Source material, Uranium.
10 CFR Part 50 Antitrust, Classified information, Criminal penalty, fire protection, incorporation by reference, Intergovernmental relations, Nuclear _ power plants and reactors, Radiation protection. Reactor siting criteria, Reporting and-recordkeeping requirements.
10 CFR Part 70 Criminal penalty, Hazardous materials-transoortation, Material control and accounting, Nuclear materials, Packaging and containers, Penalty, Radiation protection,' Reporting and recordkeeping requirements, Scientific equipment, Security measures, Special nuclear material.
10 CFR Part 72 Manpower training programs, Nuclear materials, Occupational safety and health, Reporting and recordkeeping requirements, Security measures, Spent fuel.
~
'16- ENCLOSVRE 2'
_ _. _ ._ - _ .=_. ~_.
y, , ,_ .,
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m.________. _ _ ._ _ _ - _ _ . _. _ _ - _ . -
4 for the reasons set out in the preanble and under the authority-of. the-Atomic Ener9y Act of 1954, as amended,- the Energy Reorganization Act of 1974, as amended, and 5 U.S.C. 553, the llRC is proposing to adopt the following amendments to 10 CFR Parts 30, 40, 50, 70, and 72.
PART 30 - RULES Of GfilERAL APPLICABILITY TO DOMESTIC LICEllSING Of LYPRODUCT MATERIAL
- 1. The authort.y citation for Part 30 continues to read as follows:
AUTHORITY: Secs. 81, 82, 161, 182, 183, 18E, 68 Stat.-935, 948, 953, 954, 955, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 2111.- .
2112, 2201, 2232, 2233, 2236, 2282); secs. 201, as amended, 202, 206, 88 Stat.
1242, as amended,- 1244, 1246_(42 U.S.C. 5841, 5842, 5846).
Section 30.7 also issued under Pub. L '95-601, sec. 10 92 Stat. 2951-(42 U.S.C. 5851). Section.30.34(b) also issued under sec.l184, 68 Stat._954',
as amended (42 U.S.C. 2234). Section 30.61- also issued 'under sec.187, 68-Stat. 955 (42 U.S.C. 2237),
for the purposes of sec. 223, 68 Stat. 958 .as amended-(42 U.S.C. 2273);c 19 30.3, 30.10, 30.34(b), (c), (f),-(g)-andL(1), 30.41 (a)-and (c), and 30.53-are issued under sec. 161b, 68 Stat. 948, as amended (42 U.S.C. 2201(b));'
l 30.10 is issued under sec. 1611, 68 Stat. 949, as amended-(42 U.S.C.
2201(1)); and il 30.6, 30.9, 30.34(g), 30.36, 30.50, 30.51, 30.52, 30.55, and:
30.56(b) and (c) are issued under sec. l'610, 68 Stat. 950, as amended (42 U.S.C. 2201(o))_.
17 ENCLOSURE _2 g ;-
- 2. Section 30.8 is revised to read as follows:
(b) The approved information collection requirements contained in this part appear in 96 30.15, 30.19, 30.20, 30.32, 30.34, 30.35, 30.36, 30.37, 30.38, 30.50, 30.51, 30.55, 30.56, and Appendix A and B.
- 3. In 6 30.35, the introductory text of paragraph (f)(2) is revised to read as follows: 6 30.35 financial assurance and recordkeeping for decommissioning.
(f) * * *
(2) A surety method, insurance, or other guarantee method. These methods guarantee that decommissioning costs will be paid. A surety method may be in the form of a surety bond, letter of credit, or line of credit. A parent company guarantee of funds for decommissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix A of this part. A parent company guarantee may not be used in combinaticn with other financial methods to satisfy the requirements of this section A guarantee of funds by the applicant or licensee for decommissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix B of this part. A guarantee by the l applicant or licensee may not be used in combination with any other financial l
methods to satisfy the requirements of this section or in any situation where l the applicant or licensee has a parent company holding majority control of the 18 ENCLOSURE 2
. , ,4v .,,
voting stock of the company. Any surety method or insurance used tu provide financial assurance for decommissioning must contain the following conditions:
- 4. A new Apprendix B is added to Part 30 to read as follows:
Appendix B to Part 30 - Criteria Relating to Use of financial Tests and Self Guarantees for Providing Reasonable Assurance of fur.ds for Deconunissioning.
- 1. Introduction.
An applicant or licensee may provide reasonable assurance of the availability of funds for decommissioning based on furnishing its own guarantee that funds will be available for decommissioning costs and on a demonstration that the company pssses the financial test of Section 11 below. The terms of the self- ,
guarantee are in Section 111 below. This appendix establishes criteria for passing the financial test for the self guarantee and establishes the terms for a self-guarantee,
- 11. Financial Test.
A. To pass the financial test, a company must meet all of the following criteria:
(1) Tangible net worth of at least $1 billion.
(?) Tangible net worth at least 10 times the total current decommissioning cost estimate for all decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor, or the current amount required if certification is used.
(3) Assets ?? ited in the United States amounting to at least 90 percent of total assets or at least 10 times the total current decommissioning cost estimate for all decommissioning activities for which the company is 19 ENCLOSURE 2
responsible as self-guaranteeing licensee and as parent-guarantor, or the current amount required if certification is used.
(4) A current rating for its most recent bond issuance of AAA, AA, or A as issued by Standard and Poors (S&p), or Aaa, Aa, or A as issueu by ficodys.
B. To pass the financial test, a company must meet all of the following additional requirements:
(1) Tne company must have at least one class of equity securities registered under the Securities Exchange Act of 1934.
(2) The company's independent certified public accountant must have compared the data used by the company in the financial test which is derived
-menj>daWhe, dependently audit d, ye end idcN$1sMtementNorthela' test fiscal year, with the amounts in such financial statement. In connection with that procedure, the licensee shall inform NRC within 90 days of any ma?ters coming to the attention of the auditor that cause the auditor to believe that the data specified in the financial test should be adjusted and that the company no longer passes the test.
(3) Af ter the initial financial test, the company must repeat passage o.
the test within 90 days after the close of each succeeding fiscal year.
111. Company Sel f-Guarantee.
The terms of a self-guarantee which an applicant or licensee furnishes must provide that:
A. The guarantee will remain in force unless the licensee sends notice of cancellation by certified mail to the Commission. Cancellation may not occur, however, during the 120 days beginning on the date of receipt of the notice of cancellation by the Commission, as evidenced by the return receipt.
20 ENCLOSURE 2
4 B. The licensee will provide alternative financial assurance as specified in the Commission's regulations within 90 days following receipt by the Commission of a notice of cancellation of the guarantee.
C. The guarantee and financial test provisions must remain in*effect until the Commission has terminated the license or until another financial assurance method acceptable to the Commission has been put in effect by the licensee.
D. The licensee will promptly forward to the Commission and the licensee's independent auditor all reports covering the latest fiscal, y, ear _ . , _ _ .
filed by the licensee with the Sacuritie> and Exchange Commission pursuant to e@
the requirements cf Section 13 of the Securities and Exchange Act of 1934.
E. If, at any time, the licensee's most recent bond issuance ceases to be rated in any category of "A or above by either Standard and Poors or Moodys, the licensee will provide notice in writing of such fact to the Commission within 20 days after publication of the change by the rating service.
PART 40 - DOMESTIC LICENSING OF SOURCE MATERIAL
- 5. The authority citation for Part 40 continues to read as follows:
AUlil0R11Y: Secs. 62, 63, 64, 65, 81, 161, 182, 183, 186, 68 Stat. 932, 933, 935, 948, 953, 954, 955, as amended, secs. lle(2), 83, 84, Pub. L.95-604, 92 Stat. 3033, as amended, 3039, sec. 234, 03 Stat. 444, as amended (42 U.S.C. 2014(e)(2), 2092, 2093, 2094, 2095, 2111, 2113, 2114, 2201, 2232, 2233, 2236, 2282); sec. 274, Pub. L.86-373, 73 Stat. 688 (42 U.S.C.
2021); secs. 201, as amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 21 ENCLO5URE 2
e (42 U.S.C. 5841, 5842, 5846); sec. 275, 92 Stat. 3021, as amended by Pub. L.97-415, 96 Stat. 2067 (42 U.S.C. 2022).
Section 40.7 also issued under Pub. L.95-601, sec.10, 92 Stat. 2951 Section 40.3)(g) also issued under sce: 122, 68 Stat. 939
- l (42 U.S.C. 5851).
(42 U.S.C. 2152). Section 40.46 also issued under sec. 184, C8 Stat. 954, as amended (42 U.S.C. 2234). Section 40.71 also issued under sec. 187, 68 Stat.
9 5 5 ( 4 2 U . S . C . 2 2 3 7 ) . ,, . **
- e W" l
. . , for*the purposes of sec. 223, 68 Stat. 958, as amended (42 U.S.C. 2273);
ws, ~ ,
66 40.3, 40.25(d)(1)-(3), 40.35(a)-(d) and (f), 40.41(b) and (c), 40.46, 40.51(a) and (c), and 40.63 are issued under sec. 16)b, 68 Stat. 940, as amended (42 U.S.C. 2201(b)); 40.10 is issued under sec. 1611, 68 Stat. 949, as amended (42 U.S.C. 2201(i)); and 40.5, 40.9, 40.25(c), (d)(3), and (4),
40.26(c)(2), 40.35(e), 40.42, 40.00, 40.61, 40.62, 40.64, and 40.65 are issued under sec. 1610, 68 Stat-, 950, as amended (42 U.S.C. 2201(c)).
- 6. Section 40.8 is revised to read as follows:
(b) The approved is formation collection requirements contained in this part appear in 6 h 40.25, 40.26, 40.31, 40.35, 40.36, 40.42, 40.43, 40.44, 40.60, 40.61, 40.64, 40.65, and Appendix A.
- 7. Section 40.36(e) is amended to read as follows:
. s . e s s (2) A surety method, insurance, or other guarantee method. These methods guarantee that decommissioning costs will be paid. A surety method may be in the form of a surety bond, letter of credit, or line of credit. A 22 ENCLOSURE 2
parent company guarantee of funds for deconmissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix A of 10 CFR Part 30. A parent company guarantee may not be used in combination with other financial methods to satisfy the requirements 'of this section. A guarantee of funds by the applicant or licensee for decommissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix B of 10 CFR Part 30. A guarantee by the applicant or licensee may nct be used in combination with any other financial methods to satisfy the requirements of this section or in any situation where the applicant or licensee has a parent company holding majority control of the voting stock of the company. Any surety method or insurance used to provide financial assurance for decommissioning must contain the following conditions:
PART 50 - DOMESTIC LICENSING Of PRODUCTION AND UTillZAT10N FAllLITIES j
8, The authcrity citation for Part 50 continues to road as fcilows: ,
AUTHORITY: Secs. 102, 103, 104, 105, 161, 182, 183, 186, 189, 68 Stat. -
936, 937, 938, 948, 953, 954, 955, 956, as amended, sec. 234, 83 Stat. 1244, as amended (42 U.S.C. 2132, 2133, 2134, 2135, 2201, 2232, 2233, 2236, 2239, 2282); secs. 201, as amended, 202, 206, 88 Stat 1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846).
Section 50.7 also issued under Pub. L.95-601, sec.10, 92 Stat. 2951 (42 U.S.C. 5851). Section 50.10 also issued under secs, 101, 185, 68 Stat.
936, 955, as amended (42 U.S.C. 2131, 2235); sec. 102, Pub. L.91-190, 83 Stat. 853 (42 U.S.C. 4332). Sections 50.13, 50.54(dd), and 50.103 also issutd 23 ENCLOSURE 2 i
. - - - + . . - - - . . - . _ . - - - . - . , . ~ - . . - - . _ . -
under sec. 108, 68 Stat. 939, as amended (42 U.S.C. 2138). Sections 50.23, 50.35, 50.55, and 50.56 also issued under sec. 185, 68 Stat. 955 (42 U.S.C.
2235). Sections 50.33a, 50.55a and Appendix Q also issued under sec. 102,- !
Pub. L.91-190, 83 Stat. 853 (42 U.S.C. 4332). Sections 50.34 and-50.54 also ,
issued under sec. 204, 88 Stat. 1245 (42 U.S.C. 5844). Sections 50.58, 50.91, and 50.92 also issued under Pub. L.97-415, 96 Stat. 2073 (42 U.S.C. 2239).
Section 50.78 niso issued under sec. 122, 68 Stat. 939 (42 U.S.C. 2152).
Sections 50.80 - 50.81 also issued under sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234). Appendix F also issued under sec.-187, 68 Stat. 955 (42 U.S C 2237).
for the purposes of sec. 223, 68 Stat. 958, as amended (42 U.S.C. 2273);
il 50.5, StL46(a) and (b), and 50.54(c) are issued under sec.161b, 68 Stat.
948, as amended (42 U.S.C. 2201(b)); il 50.5, 50.7(a), 50.10(a)-(c), 50.34(a) l and (e), 50 d4 4)-(c), 50.46(a) and (b), 50.47(b), 50.48(a), (c), (d), and (e), 50.49(a), W.54(a), (i), (t)(1), (1)-(n), (p), (q), (t) . (v), and (y),
50.55(f), 50.55t(a), (ct-(e), (g), and (h), 50.59(c), 50.60(a),150.62(b),
50.64(b), 50.05, and 50.80(a) and (b) are issued under sec. 1611, 68 Stat.
049, as amended (42 U.S.C. 2201(i)); and 'il 50.9, 50.49(d), (h), and (,1),
, 50.54(w), (z), (bb), (cc), and(dd),50.55(e),50.59(b),50.61(b),50.62(b),
50.70(a), 50.71(ar-(c) and (e), 50.72(a), 50.73(a) and (b), 50.74, 50.78, and 50.90 Are issued under sec. 1610, 68 Stat. 950,.as amended (42 U.S.C. ,
2201(o)).
- 9. Section 50.8 is revised to rea'd as follows:
i 24 ENCLOSURE 2 ,
L L. .
{
as, -wl f.,,,- ,.'-=vm-,--,n,,d,,,, ,,N.,,,n-,.-- ,-----,.n--,---,,,-A-,,,,,.-4-. ,,.--,,,----m,n,,.,.,,,n,,,-~-.,---,.,.n- --,6,,
4-(b) The approved information collection requirements contained in this part appear in 6 6 50.30, 50.33, 50.33a, 50.34, 50.34a, 50.35, 50.36, 50.36a, 50.48, 50.49, 50.54, 50.55, 50.55a, 50.59, 50.60, 50.61, 50.63, 50.64, 50.65, 50.71, 50.72, 50.75, 50.80, 50.82, 50.90, 50.91, and Appendices A, 0, E, G, H, 1, J, K, M, N, 0, Q, and R.
- 10. Section 50.75 (e)(1)(iii) is revised to read as follows:
(iii) A surety method, insurance, or other guarantee method. These methods guarantee that decommissioning costs will be paid. A surety method may be in the form of a surety bond, letter of credit, or line of credit. Any surety c,ethod or insurance used to provide financial assurance for decommissioning must contain the following conditions:
- 11. Section 50.75(e)(2)(iii) is revised to read as follows:
(iii) A surety method, insurance, or other guarantee method. A parent company guarantee of funds for decommissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix A of 10 CFR Part 30. A parent company guarantee may not be used in combination with other financial methods to satisfy the requirements of this section. A guarantee of funds by the applicant or licensee for decommissioning costs based on a l financial test may be used if the guarantee and test are as contained in Appendix B of 10 CFR Part 30. A guarantee by the applicant or the licensee may not be used in combination with any other financial methods to satisfy the requirements of this section or in any situation where the applicant or 25 LNCLOSURE 2 l
l
licensee has a parent company holding majority control of the voting stock of -
j the company, e
- * * *
- j L
PART 70 - DOMESTIC LICENSING Of SPECIAL NUCLEAR MATERIAL
- 12. The authority citation for Part 70 continues to read as (cllows: ,
AUTHORITY: Secs. 51, 53, 161, 182, 183, 68 Stat. 929, 930, 948, 953, 954, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 2071, 2073, ,
2201, 2232, 2233, 2282); secs. 201, as amended, 202, 204, 206, 88 Stat. 1242, ,
as amended, 1244, 1245, 1246 (42 U.S.C. 5841, 5842, 5845, 5846).
Sections 70.l(c) and 70.20a(b) also issued under secs. 135, 141, Pub. L. .97-425, 96 Stat. 2232, 2241 (42 U.S.C. 10155, 10161). Section 70.7 also !
issued under Pub. L.95-601, sec. 10, 92 Stat. 2951 (42 U.S.C. 5851). Section ,
70.21(g) also issued under sec. 122, 6C Stat. 939 (42 U.S.C. 2152). Section-79.31 also issued under sec. 57d, Pub. L.93-377, 88 Stat. 475 (42 U.S.C. _ _
2077). Sections 70.36 and 70.44 also issued under sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234). Section 70.61 also issued under secs. 186,'187, 68 Stat. 955 (42 U.S.C. 2236, 2237). Section 70.62 also issued under sec.108, j
- 68 Stat. 939, as amended (42 U.S.C. 2138). ;
For:the purposes of- sec. 223, 68 Stat. 958, as amended-(42 U.S.C. 2273);
il 70,3, 70.10, .70.19(c), 70.21(c), 70.22(a), -(b), (d)-(k), '70.24(a) and (b),
70.32(a)(3), (5)',-(6), (d), and (i), 70.36, 70.39(b) and (c), 70.'41(a),-
70.42(a) and (c),.70.56,_70.57(b), (c), and (d), 70.58(a)-(g)(3), and-_(h)-(j) _ _
are issued under sec. 161b, 68 Stat. 948,-as amended (42 U.S.C. 2201(b));
it-70.7, 70.10.-70.20a(a) and'(d), 70.20b(c) and(e), 70.21(c), 70.24(b),- ,
26 ENCLOSURE'2
,}
d-=g5L y. e aw-.s 9p. -.p. -,-w9c-.+pg g g e,.,, ,,w99p.4__,. ..,.,4 3 y.,.9.,y.94, .y, ,- r,-,.c-.-y, ,6.,,y,-y vy er#W-'
i 70.32(a)(6), (c), (d), (e), and (g), 70.36, 70.51(c)-(g), 70.56, 70.57(b) and (d), and 70.58 (a)-(g)(3) and (h)-(j) are issued under sec. 1611, 68 Stat.
949, as amended (42 U.S.C. 2201(1)); and il 70.5, 70.9, 70.20b(d) and (e),
70.38, 70.50, 70'.51(b) and (i), 70.52, 70.53, 70.54, 70.55, 70.58(g)(4), (k),
and (1), 70.59 and 70.60(b) and (c) are issued under sec. 1610, 68 Stat. 950, as amended (42 U.S.C. 2201(o)).
- 13. Section 70.25(f)(2) is amended to read as follows:
(2) A surety method, insurance, or other guarantee method. -These methods guarantee that decommissioning costs will be paid. A surety method may be in the form of a surety bond, letter of credit, or line of. credit. A-parent company guarantee of funds for decommissioning costs based on a financial test may be used if the guarantee and test are as contained in
-Appendix A of 10 CFR Part 30. A parent company guarantee may not be used.in.
combination with other financial methods __to satisfy the requirements _of this-section. A guarantee of funds by the applicant or. licensee for decommissioning costs based on a financial test may be used if the guarantee and test are.as contained in Appendix B of 10 CFR Part 30..-A guarantee.by the applicant or the licensee may not be used in combination with any other-financial' methods to satisfy the requirements of this .section or in any.
situation where the applicant or licensee has a parent' company holding majority control of the voting stock of the company. Any- surety method or insurance used to provide financial assurance ;or decommissioning must contain the following conditions:
27 ENCLOSURE 2
PART 72 - LICENSING REQUIREMENTS FOR THE INDEPENDENT STORAGE OF-SPENT NUCLEAR FUEL AND HIGH-LEVEL RADI0 ACTIVE WASTE
- 14. The authority citation for Part 72 continues to read as follows:
AUTHORITY: Secs. 51, 53, 57, 62, 63, 65, 69, 81, 161, 182, 183, 184, 186, 187, 189, 68 Stat. 929, 930, 932, 933, 934, 935, 948, 953, 954, 955, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 2071, 2073, 2077, 2092, 2093, 2095, 2099, 2111, 2201, 2232, 2233, 2234, 2236, 2237, 2238, 2282); sec. 274 Pub. L.86-373, 73 Stat. 688, as amended (42 U.S.C. 2021); sec. 201,-as ,
amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846); Pub. L.95-601, sec. 10, 92 Stat. 2951 (42 U.S.C. 5851); sec. 102, Pub. L.91-190, 83 Stat. 853 (42 U.S.C. 4332); Socs. 131, 132, 133, 135, 137, 141, Pub. L.97-425, 96 Stat. 2229, 2230, 2232, 2241, sec. 148, Pub. L.
100-203, 101 Stat. 1330-235 (42 U.S.C. 10151, 10152, 10153,-10155, 10157, l
10161, 10168).
Section 72.44(g) also issued under secs.142(b) and 148(c), (d), Pub. L.
100-203, 101 Stat. 1330-232, 1330-236 (42 U.S.C. 10162(b), 1016B(c), (d)). .
Section 72.46 also issued under sec. 189, 68 Stat. 955 (42 U.S.C. 2239);-sec.
' 134, Pub. L.97-425, 96 " tat. 2230 (42 U.S.C._10154). Section 72.96(d) also issued under sec.145(g), Pub. L.100-203,101 Stat.1330-235 (42 U.S.C. _
10165(g)), Subpart J also issued under secs. 2(2). 2(15), 2(19), 117(a),
141(h), Pub. L.97-425, 9615 tat. 2202, 2203, 2204, L2222, 2244 -(42 U.S.C, 10101. 10137(a), 10lfl(h)). Subparts K and L are also issued under sec.133, 98 Stat 2230 (42 U.S.C. 10153) and sec.'218(a), 96 Stat.-2252-(42 U.S.C.
10198).
28 ENCLOSURE 2 ,
~ ,
y, p. - , , , ,N,,N,,,,,,--, ,r,m,, , , , ,,,,.,---,N r r,6,,,n- ----a ,l,n , - - _ -n,-.., -.,,,_,..,._.-,n ..... ,- ,,,,--,J--. .
i For the purposes of sec. 223, 68 Stat. 958, as amended (42-U.S.C. 2273); j 6672.6,72.12,72.22,72.24,72.26,72.28(d),72.30,72.32,72.44(a), l
^
t (b)(1), (4), (5), (c), (d)(1), (2), (e), (f), 72.48(a), 72.50(a) -72.52(b),
72.72(b), (c), 72.74(a), (b), 72.76, 72.78, 72.104, 72.106, 72.120, 72.122, 72.124,72.126,72.128,72.130,72.140(b),(c),72.148,72.154,72.156, 72.160, 72.166, 72.168, 72.170, 72.172, 72.176, 72.180, 72.184, 72.186 are issued under sec. 161b, 68 Stat. 948, as amended (42 U.S.C. 2201(b)); .
5 6 2.10(a), (e), 72.12, 72.22, 72.24, 72.26, 72.28, 72.30, 72.32, 72.44(a),
(b)(1), (4), (5), (c), (d)(1), (2), (e), (f), 72.48 (a), 72.50(a), 72.52(b),
, - 3-72.90(a)-(d), (f), 72.92, 72.94, 72.98, 72.100, 72.102(c), (d), (f), 72.104, !
72.106, 72.120, 72.122, 72.124, 72.126, 72.128, 72.130, 72.140(b), (c),
72.142, 72.144, 72.146, 72.148, 72.150, 72.152, 72.154, 72.156, 72.158, _
72.160, 72.162, 72.164, 72.166, 72,168, 72.170, 72.172, 72.176, 72.180, ,
72.182, 72.184, 72.186, 72.190, 72.192, 72.194 are issued under sec. 1611, 68 Stat. 949, as amended (42 U.S.C. 2201(i)); and il 2.10(e), 72.11, 72.16, ,
72.22,72.24,72.26,72.28,72.30,72.32,72.44(b)(3),_(c)(5),(d)(3),(e), d (f),72.48(b),(c),72.50(b),72.54(a),(b),(c),72.56,72.70,72.72, ,
! 72.74(a), (b), 72.76(a), 72.78(a), 72.80, 72.82, 72.92(b), 72.94(b),
72.140(b), (c), (d), 72.144(a), 72.146, 72.148, 72.150, 72.152, 72.154(a),
(b), 72.156, 72.160, 72.162, 72.168, 72.170, 72.172, 72.174, 72.176, 72.180, .
72.184, 72.186, 72.192, 72.212(b), 72.216,.72.218 -72.230, 72.234(e):and (g)-
p are issued under sec. . 1610, 68 Stat. 950, as amended (42 U;S.C. 2201(o)).-
4 l
i y 15.Section72.30(c)(2)isamendedtoreadasfollows: q L * * *1 *
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29 ENCLOSURE 2 w
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(2) A surety method, insurance, or other guarantee method. These i
methods guarantee that decommissioning costs will be paid. A surety method j may be in the form of a surety bond, letter of credit, or line of credit. A parent company guarantee of funds for decommissioning costs based on a .[
financial test may be used if the guarantee and test are as contained in i r
Appendix A of 10 CFP. Part 30. A parent company guarantee may not be used in i combination with other financial methods to satisfy the requirements of this ,
section. A guarantee of funds by the applicant or licensee for .
deconnissioning costs based on a financial test may be used if the guarantee 4
and test are as contained in Appendix B of 10 CFR Part 30. A guarantee by the applicarit or the licensee taay not be used in combination with any other financial method: to satisfy the requirements of this section or.in any situation where the applictnt or. licensee has a parent company holding n.sjority cortrol of the voting stock of the company. Any surety method or insurance used to provide financial assurance for decommissioning must contain !
fi the following_ccnditlons:
l Dated at Rockville, Maryland, this day of , 1992. q for the Nuclear Regulatory Commissions !
Samuel-J.,Chilk,.
Secretary ~of the Commission.
i
-30 . ENCLOSURE 2
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9' 4-ENCLOSURE 3
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i REGUIATORY ANALYSIS OF 3
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DEC0!Oi!SSIONING FINANCIAL ASSURANCE .:
?
f SELF. GUARANTEE OPTIONS i
FOR' MATERIALS LICC::FFS November 3, 1992
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- 1. INTRODUCTION 1.1 Background j The U.S. Nuclear Regulatory Conaission (NRC) has accepted a pocation to amend the current regulations establishing general requirements for l decommissioning licensee facilities to allow certain NRC non electric utility i reactor licenaaes to a-1f ;uarantes decommissioning funding costs. In a notice of receipt of petition for rulemaking published in the Federalmf enister -
(56 FA 48445) on September 25. 1991, NRC requested comments on the contents of a petition for rulamaking received from the General Electric Corporation (GE) ,
and the Westinghouse Electric Corporation (Westinghouse) requesting su:h an [
amenda.ent. After reviewing the comments and other materials, the Cemnission ;
in August 1992 Jirected the staff to proceed with regulatory amendments. This Regulatory Acalyais var prepared pursuant to :CRFC/rk.0058 to support the 1 regulatory action and examine the costs ana benefits of the alternatives 3 considered by the cammission. ,
NRC currently administers over 7,000 licenses for the possession and use of nuclear matcrials under 10 CFR Parts 30, 40, 50 (excluding power reactors),
70, and 72. Approximately 700 of the licensees who hold these licenses are required to provide financial-assurances for decommissioning under rules l promulgated in 1988 (53 FR 24018, June 27, 1988).
The rules on financial assurance for decommissioning provide that ,
licensees under 10 CFR Parts 30, 40, 50, 70, and 72 must provide financial assurance to ensure that decommissioning of licensed facilities will be accomplished in a safe and timely manner and that-adequate funds will be 1 available for this purpose. According to the decommissioning regulations,2 financial assurance must be provided by one or more of the following methods; t (1) Prepayment. Prepayment is the deposit prior to the start of operation into an account segregated from licensee assets and -'
outside the licensee's administrative control of cash or liquid assets such that the amount of funds would be sufficient to pay decommissioning costs. Prepayment may be in the form of a trust, ,
escrow account, government fund, certificate of deposit, or
, deposit of government securities.
(2) A surety methodi insurance, or other guarantee method. These methods guarantee that decommissioning costs will be paid should the licensee default. A surety method may be in the form of a surety bond, letter of credit, or line of credit. A parent ~
1 NUREC/BR.0058. NRC Renulatory Analysis uuideliner. Revision 1 U.S, '
- Nuclear Regulatory Commission, May 1984.
.2 The same four alternative methods of providing financial assurance are authorized for licensees under Parts 30, 40, 50, 70, and 72 in-the-following ,
sections: 10 CFR 55 30.35(f), 40.36(e), 50.75(e), 70.25(f). and 72.30(c).
.1 l
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company guarantee of funds for decommissioning costs based on a financial test may be used if the guarantee and test are as '
specified in Appendix A of 10 CFR Part 30. A parent company guarantee may not be used in combination with any other financial methods to satisfy the [ decommissioning financial aerurance) requirements.
(3) An external sinking fond in which deposits are made at least annually, coupled with a surety method or insurance, the value of which may decrease by the amount being accumulated in the sinking fund. An external sinking fund is a fund established and maintained by setting aside funds periodically.in an account segr6 gated from licensee assets and outside the licensee's administrative control in which the total amount of funds would be sufficient to pay decommissioning costs at any time termination of operation is expected. An external sinking fund may be in the f f ctre of a trus t , e-trow account, government fund, certificate of '
deposit, or deposit of government securities. ;
?
(4) In the case of Federal, state, or local government licensees, a ,
statement of intent . . indicating that funds for decommissioning will be obtained when necessary."3 [
With the exception of the financial test component of the parent company; '
guarantee, the terms and conditions of the various financial mechanisms that may be used as proof of financial assurance for decommissioning are provided in guidance.' The' financial test requirements are provided in the _;
regulations, at 10 CFR Part 30 Appendix A, and are referenced in other:
pertinent Parts.5 The parent-company guarantee provided for under the' decommissioning.
financial assurance regulations contains two elements: a guarantee anu an; .
underlying financial test submission, -Under this mechanism, a corporate parent of the licensee may submit a guarantee to NRC affirming 1that the corporate parent will pay the decommissioning costs if the licensee does not l pay. For such a guarantee to be acceptable, the: corporate parent-must . i demonstrate that it has adequate financial-resources to cover the costs of- ~ '
decommissioning activities. -_The corporate parent makes such a demonstration when it provides specified documentation to NRC that it passes a financial test that measures the financial strength of the firm. ,
P 3 53 FR 24018, June 27, 1988, :
' U.S. . Nuclear Regulatory Commission, getulatory cuide 3.66. Standard! .
. Format and Content of Financial Assurance Mechanisms Recuired For :
Decommission!nn Under 10 CFR Parts 30. 40. 70. and 72, June 1990.
5 Theidecommissioning regulations do not define " parent company."' NRC- - .
L, has-provided in Recu13torv Guide 3.66 that in order to qualifyras a parentL g company a firm-must-demonstrate thatsit has " majority control of the -
E licensee's voting. stock." Reculatory cuide 3.66, pp. 3 21 and 3 23e l- U 2-
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. l The financial test currently requires a parent corporation to meet, on i an annual basis, one of two sets of alternative-financial criteria. Under the j first alternative, the parent company must demonstrate that it possesses !
tangible net worth of at least $10 million, as well as tangible net worth and '
net working capital at least six times the decommissioning cost estimate. )
Tangible net worth is defined as net worth minus goodwill, patents, !
l trademarks, and copyrights. The parent corporation must show that it possesses assets in the United States amounting to at least 90 percent of its total assets or at least six times the sum of the current decommissioning cosi.
estimates being covered by the test. The parent corporation also inust show.
that it meets or exceeds at least two of three specified financial ratios (tatal liabilities to net worth less than 2.0; net income plus depreciation, depletion, and amortization to total liabilities greater than 0.1; and current l asset. to current liabilities greater than 1.5). Under the second alternative l of the financial test, the parent corporation must show that it possesses j tangible net worth of at least $10 million, as well as tangible net worth at .
least six times decommissioning costs. It also must show that it possesses. l assets in the United States amounting to at least 90 percent-of its total assets or at least six times the sum of the current decommissioning cost estime.tes being covered by the test. Finally, it must show that it has a current investment grade rating for its most recent bond issuance from one of two major bond rating organizations. t 1.2 Statement of the Problem With this rulemaking, the NRC is seeking to address a number of issues ,
raised in the petition and also presented by the NRC in its Notice of Receipt I of Petition for Rulemaking.6 - The primary issues are (1) whether self-guarantees prcvided by licensees of suf ficient financial strength and stability would provide adequate. financial assurance and (2) whether use of self guarantees would.substantially reduce the costs of financial assurance to those licensees that qualify to use a self guarantee mechanism. The petition- "
requests that NRC amend the decommissioning financial assurance regulations to allow licensees to provide self guarantees of decommissioning funding using a more restrictive financial test than the financial test used in the NRC parent guarantee mechanism.
1.3 Objective of the Proposed Rulemaking NRC's objective in proposing a self guarantee mechanism is to reduce the cost burden of financial assurance on licensees while prw iding NRC with-sufficient assurance that decommissioning costs will, be funded when necessary.
- 2. PRELIMINARY IDENTIFICATION AND DESCRIPTION OF OPTIONS-In analyzing the petition from GE and Westinghouse, NRC considered three regulatory options: (1) no-action; (2) adopt the self guarantee as' proposed by.
the petition; and (3) adopt the self guarantee proposed in the petition but-j 6 '56'FR 48445, September 25, 1991'.
The Federal Rerister Notice summarizes arguments presented in the petition at pp. 4-8.
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rodified to delete *he $1 billion net worth requirement proposed by the
' ?G p-otitioners, g 2,1 Option 1: No Action
..y Under Option 1, NRC would continue to prohibit the use of any type of
- uarantee mechanism. Licensees that tre unable to obtain a parent
- ny guarantee because they do not havr. a parent company will, as at
- 1 i aent, be able to demonstrate financiel assurance ising one of the other jf% '
acial assurar.ce asthods currently allowed (i.e., prepayment, surety method insurcnce, external sinking fund coupled with a surety method or insurance, vi statement of intent).
E3 ?.2 Option 2: Adopt the Self-Guat .. tee Proposed in the Petitinn Under this op' on, NRC would allow licensees to use the self-gu tee ,
proposed b'- CE and k'estinghouse in their petition for rulemaking. Th I petition details specific criteria for a self guarantee, which would L_ -
available for any licensee other than tn electric utility licensed to operate 8 a reactor under 10 CFR Part 50. Many of the criteria under the proposed self- '
guarantee mechanism tarallel requirements that are already applicable for parant guarantees and/or other mechanisms. The proposed criteria are listed r below:7
- 1) n .e self guarantee may not oe used "i.n any situation where the applicant or licensee has a parent company holding majority conttol of the voting stock of the company."
- 2) The applicant or licensee cust demonstrate that it passes a financ.al test. All _ the following terms of the test must be
,atisfied: ,
(a) The company must h..ve a current rating for its most recent bond issuance of AAA, AA, or A, as. issued by Standard and -
Poor's or Aaa, Aa, or A, as issued ':y Moody's. -
(b) The company must have tangible net worth at least 10 times the total current decommissioning cost estimate for all 4 decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor, or the current amount required if certification is used.
(c) The c,mpany must have tangible net worth of at least
$1 billion.
(d) The company must have assets located in the United States amounting to at least 90 percent of total assets or at-least 10 times the total current decommissioning cost estimate for 7
-4
all decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor, or the current amount required if ce-tification is used.
- 3) The applicant or licensee must continue to satisfy certain procedural require:aents:
a) The company's independent certified public accountant must.
compare the data used by the company in the financial test with the amounts in the company's independently audited year end financial statements.
b) The company must notify NRC within 90 days of any matters coming to the attention vf the auditor that cause the auditor to believe that the data specified in the financial _
3;
< test should be adjusted and that the company no longer yi' passes the test.
c) The company must have at least one .. lass of equity sacurities registered under the Securities Exchange Act of '
1934.
d) After the initial financial test, the company must repeat the passage of the test witnin 90 days after the close of
~
each succeeding fiscal year.
e) If the company no longer passes the financial test, it must se:nd notice of intent to establish alternate financial assurance. Such notice must be sent within 90 days after the end of the fiscal year fer which the year end data show that the company no longer meets the financial test requirements. The licensee must provide alternate financial assurance within 120 days after the end of such fiscal year.
- 4) The applicant or licensee must furnish its own guarantee'that funus will be available for decommissioning costs. The terms of this seli-guarantee must provide that:
(a) The self-guarantee will remain in force unless written notice of cancellation is sent to NRC. The self-guarantee, however, must remain in force for 120 days after NRC receives notice of cancellation.
(b) Alternative financial assurance will be provided within 90 days after NRC receives notice of cancellatica of the.self-guarantee.
(c) The self-guarantee and supporting financial test will remain in force until the Commission has terminated the license or until another acceptable financial assurance method has been put into effect by the licens e.
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-The licensee will provide the Commission with~cogies of all:
(d)
-current reports filed with the Securities:and Exchange '
Commission'under Section-13 of the Securities Exchange-Act of 1934 (e) The' licensee will provide netice to the Commission within -
20 days after the rating of its most recent bond issuance ceases to be A or above by either. Standard and Poor's or- .{
Moody's. ]
2.3 Option 3: Adopt the Self-Guarantee Proposed in the Petition- '
Modified to Delete the $1 Billion. Net Worth Requirement Under Option 3, NRC would allow a self guarantee based on the financial-test criteria proposed in the petition, but would omit the requirement 1that d
tangible net worth must be greater'than $1 billion. Thus, licensees _would still be required to have-a current bond rating of A or better, tangible net-vorth at least 10 times the current decommissioning cost estimate (or the current a ount required if certification is'used), and assets located in the J United States amounting to at least 90 percent of total assets or at least:10 ~.
times'the current decommissioning cost estimate (or certification au,ount),
- 3. ANALYSIS OF OPTIONS 3.1 Methodology The method used by NRC to analyze the three tegulatory options. described above, to determine the number of liennsees able to use each of'the self-guarantee options, and to evaluate the coeta and. benefits of each-option consists of several key steps. First,-NRC developed a financial data base of .
materialalicensees sub;ect ro financial assurance requirements'under 10-CFR Parts 30, 40, 50, 70. or 72. -NRC ther used-this database to evaluate the ~
availability and assurance risk of the-self-~ guarantee options. ~ Finally,;NRC.
calculated and compared the coces and beneifts of each regulatory' option,3 Development of Financial Data Base
.NRC's first step in developing the financial data base was_to identify all material licensees subject to financial ~assurar.co requirements under 10 .
- CFR Parts 30, 40, 50,;7U, or 72.s NRC then collected financial da,:a for -
o, a--
Certain licensees (such:as. universities) were excluded from the=
analysis because : they generally prepare financial data thatfis not suited -for -
use in self-guarantee mechanitas. In addition., Federal,-State, and local-government licensees were excluded because they are eligible to use a_
^
statement'of intent to assure for decommissioning costs, and would probably opt-for the statement of intent over-the1self-guarantee. When a Part 50 non-
-utility. licensee also held'_a license under Part 30, 40, 70, or_72, the.
. . analysis' treated theseilicensees as Part- 30, 40, 70, or 72 licensees.
1 I
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-r these licensees from-Dun and Bradstreet and Standard & Poor's. Licensees were
- eliminated from the data base if financial data were unavailaole.or of' questionable quality.
Although the'two'self guarantee options include a U.S. assets requirement, data on domestic assets could not be obtained from Dun and Bradstreet. This may lead to an overestimate of the number of firms able to. i
- use a self-guarantee option. Similarly, because no information11s available on auditors' opinions, the data base could not'be.used to evaluate whether licensees have their financial statements audited by independent certified-accountants to confirm that their accounting practices are in conformity with-generally accepted accounting practices. The absence of this information also-could lead to an overestimate of the number of firms able to pass all -
financial tests.
Availability The " availability" of the two self-guarantee options refers to the number of NRC licensees that could use a particular option given their ability.
to satisfy the financial requirements of the option, Using the-data base described above, NRC first determined whether each licensee in the data base ,
would be able to meet the requisite financial criteria. NRC then calculated ,
availability by counting.those licensees able to use the self guarantee .
option.
Assurance Risk
" Assurance" is a concept closely related to securi*.y: something given, deposited, or pledged to make certain the performance of an obligation or-the payment of a debt. Although the licensee always retains primary responsibility for performance of the decommissioning regardless of the method of assurance used, most financial assurance mechanisms.(e.g., prepayment.
mechanisms and surety mechanisms) provide a secondary level of +rotection to guard against the possibility that the licensee may_be unable to meet its decommissioning obligation. Thus, the assurance risk associated-with most mechanisms equals the possibility that both the licensee and the financial 1 -
assurance provider (e.g., banks, sureties) will be unable to meet the required obligations '
In the case of self guarantees, the guarantor is not required to set funds aside or obtain a. third party guarantee if it can demonstrate by.means nf a_ financial test that its. financial resources are sufficient to pay-_the assured costs =whenever those costs come due. Thus, for self-guarantees, the-L assurance risk equals .the possibility that the licensee will be unable Leo meet the required obligations, LIn other words, the assurance provided by.a self-guarantee is exposed to the risk that a_ decline in the financial' condition of-t he self-guarantor will not1be ie , ified in time so that a prepayment or' 9
L This analysis assumes tha' mechanisms are' properly drafted andz ~
esecuted and are issued by qualifiua providersi Similarly, the possibility of collusion or fraud has not been considered.
l.
L
.8' third party financial assurance mechanism can be obtained to replace the self-guarantee. NRC analyzed this risk associated with self guarantees by evaluating the "misprediction" rates of components of financial tests proposed for use to_ screen potential self guarantors, and by' evaluating _the baseline failure rates for. firms calculated by firm size (as measured by net worth).
Costs and Benefits The total cost of the proposed rule includes, in addition to implementation costs, the public and private costs associated with the self-guarantee mechaniwn. Private costs consist primarily of the fees that licensees must pay to a third party-in order to obtain a financial-assurance mechanism. Thus, firms can avoid much of the private cost of financial assurance if they can obtain a self-guarantee or a parent company guarantee. .
Estimates of private costs were derived from the number of licensees able to.
pass the proposed self-guarantee test and the number of licenses held by such licensees Public costs of a self-guarantee include the decommissioning costs that are assured by the self-guarantee but which the licensee does not pay due to-bankruptcy. Although public costs can largely be avoided by not allowing the self-guarantee, the total cost (i.e., public plus private) may be reduced-by allowin6 the self guarantee if private costs decline more than public costs-rise. The public costs of the self-guarantee mechanism are calculated by multiplying the assurance risk by the amount of the decommissioning costs
, expected to be assured using the mechanism. NRC's estimates of public. costs reflect che assurance risk of each self guarantee by net worth category'and the number of licenses covered by firms in each net worth _ category.
The not benefit of a self-guarantee would equal the savings to licensees-resulting from use of the self-guarantee mechanism (rather than from a more expensive third party techanism) minus any increase'in public costs.
3.2 Availability of Self-Guarantee Options s
- NRC's analysis indicates that Option 2, the self-guarantee option-proposed in the GE and Westinghouse' petition, could be used by apprcximately.
20 materials licensees (estimated to hold the equivatent of about'54 licenses at decommissioning costs of $750,000 per license). Under option 3, which deletes the $1' billion tangible net worth requirement, an additional 7' firms (holding 11 licenses) with net worth less than $1-billion become capable of ,
satisfying the requirements.
" 3.3 Assurance Risk The estimated annual assurance risk for option 2 is 0.13 percent. In other words, there is a 0,13 percent chance that a licensee using the self-
~
guarantee ' proposed by GE and Westinghouse will go bankrupt and be unable: to cover the costs of decommissioning in a given year. The estimated assurance 1 I
/
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risk for Option 3 is also 0.13 percent.10 There are no available data with "~'
which to estimate the default risk of A rated bonds by net worth category of
_ , , the bond issuer. Furthermore,*the premise of the bond ratings is that all A-rated bonds should be of the same approximate risk (i.e., different bond ratings are assigned to different risk categories). NRC believes that this indicates that a net worth requirement and a minimum bond rating may be redundant, i.e., if net worth is factored into a firm's bond rating. Moody's data on the historical default risk of A-rated bonds indicate that risk is about 0.13 percent per year. Although this risk is slightly higher than the risk associated with the third party financial assurance mechanisms allowed under current regulations " the risk associated with the NRC parent guarantee is similar to the risk of the self-guarantee when the parent company / licensee relationship is not independent. NRC believes that the risk of the self-guarantee is extremely small. Furthermore, allowing use 01 a self-guarantee mechanism reduces the sum of public and private costs (see below). -
3.4 Public and Private Costs of Self-Guarantee Options In this analysis, public costs are defined as the amount of decommissioning costs that would be required to be paid by the public sector due to the financial failure of licensees and/or their guarantors without the substitution of another source of financial assurance. Private costs are defined as the cost of financial assurance mechanisms that must be obtained by licensees in order to comply with regulatory requirements.
Mechanisms based on financial tests, such as a parent company guarantee and a self-guarantee, reduce private costs by allowing licensees to demonstrate financial assurance without incurring the fees associaced with the use of third-party mechanisms such as letters of credit, surety bonds, etc.
The private costs associated with financial test mechanisms are assumed to be the costs of preparing the necessary s bmissions to NRC and the cost of preparation of letters from an independent auditor.
For the three options, Table 3.1 presents and compares the estimated -
private costs, public costs, and total costs (private plus public costs) of NRC's decommissioning financial assurance requirements for materials licensees regulated under 10 CFR Parts 30, 40, 70, and 72:
10 NRC's estimates of the assurance risk associated with Options 2 and 3 are identical because the assurance risk for Option 3 was used to proxy for the risk associated with Option 2 (which could not be calculated directly).
Because option 2 contains every requirement in Option 3 plus an additional
$1 billion tangible net worth requirement, the actual assurance risk associated with Option 2 is likely to be slightly less than the figure cited above.
" For example, the risk associated with small licensees (those with less than $10 million in tangible net worth) using letters of credit from savings and loans is estimated at 0.055 percent.
9
Table 3.1 Public and private costs of financial assurance with and without proposed self-guarantee ($000)12 Private Public Total Financitl Assurance Option Costs Costs Costs 1: All licensees use $3,060 $26 $3,086 parent company guarantee or bank letter of credit 2: All licensees use $2,453 $78 $2,531 proposed self-guarantee, parent company guarantee, or bank letter of credit 3: All licensees use $2,329 $89 $2,418 modified self-guarantee (without $1 billion requirement?, parent company guarantee, or bank letter of credit
.: =r - -
Option 1 The first scenario represents the existing baseline, i.e.,
the self-guarantee is not allowed, and licensees that are capable of obtaining a parent company guarantee are assumed to use that mechanism. Licensees that are unable to obtain a parent company guarantee are assumed to use letters of credit at an annual cost of 1.5 percent of their face value.
Option 2 The second scenario anticipates use of the self-guarantee by all licensees that meet the financial conditions of the self-guarantee. Similarly, licensees that are capable of obtaining a parent company guarantee are assumed to still use that mechanism.13 1Jnder thic scenario, only licensees that are unable to use either a self guarantee or a parent company guarantee are assumed to obtain letters of credit.
Here, public costs are higher than under the first scenario, but both private costs and total costs are further reduced.
12 scurce: ICF calculations. The costs in the table do not reflect any decrease in private decommissioning costs that would occur if the public assumes the decommissioning costs that are unfunded by the private sector.
13 Because the NRC parent company guarantee is available only to licensecs that are subsiuiaries, and the proposed self-guarantee is available only to licensees that have no parent company, the two tests cover separate groups of licensees. In some cases, however, a firm may be both a licensee and a parent company to other licensees.
5
Ia -
Option 3 The third scenario represents the. option based on the financial test criteria proposed in the petition, but without the requirement that tangible net worth must be greater than $1 billion. Under this scenario, the aveilability of the self-guarantee increases to include a few more licensees. Public costs rise, but private costs-fall by a greater amount, representing an Mitional decrease in total costs.
As Table 3.1 demonstrates, while private costs decline substantially under the proposed self-guarantee (Option 2), public costs rise. Total annual costs, however, are lower when the self-guarantee mechanism is available. For example, total annual costs are reduced by an estimated $555,000 under Option 2, Allowing use of the modified self-guarantee (Option 3) reduces total annual costs by an estimated $668,000.
Table 3.2 also shows the total costs of financial assurance under the three regulatory options being considered, but it presents the total costs for 15, 20, and 30 years . Again, total costs are lowest when the self-
. guarantee mechanism is available. Under Option 2, which would allow the self. ,
guarantee proposed by the petitioners, total costs would be reduced by an estimated $5,759,000 over 15 years, $6,915'000 over 20 years, and'$8,530,000 over 30 years, Dropping the $1 billion net worth requirement would further reduce _ total costs by $1,170,000 over 15 years, $1,404,000 over 20 years, and
$1,732,000 over 30 years.
These cost savings may not be large relative to total decommissioning costs; however, the cost savings are substantial relative to total financial assurance costs.
3.5 Decision Rationale for Selection of Proposed Option On the basis of the analyses summarized above, the Commission is considering Opticns 2 and 3 and is asking for public comments on those options.
- 4. FINANCIAL AND ECONOMIC IMPACTS OF SELF-GUARANTEE RULEMAKING 4.1 Impsets on Licensees Adoption of a self-guarantee option is not expected to produce any negative financial or economic impacts. Because a self guarantee option will generate cost savings for those licensees able to use the self-guarantee, the rulemaking is expected to produce positive financial _ impacts. Other licensees '
that_cannot use the self-guarantee, including licensees that qualify as small businesses, will be unaffected by the rulemaking and therefore should not experience significant impacts.
I' Costs shown represent the net present value of, annual costs for .15, 20, and 30 years, assuming a discount rate of 5 percent.
Table 3,2 Total net present value of financial assurance costs over 15, 20, and 30 years, with and without proposed self-guarantee (S000)15 15 20 30 Financial Assurance Option years years years 1: All licensees use $32,027 $38,453 $47,433 parent company guarantee or bank letter of credit 2: All licensees use $26,268 $31,538 $38,903 proposed self-guarantee, parent company guarantee, or bank letter of credit _ _ .
3: All licensees use $25,098 $30,134 $37,171 modified self-guarantee (without the $1 billion requirement), parent company guarantee, or bank letter of credit 4.2 Impacts on NRC and the States No significant impacts are expected for NRC or the States because the effort to review and administer the self-guarantee is expected to be comparable to that associated with the parent company guarantee and other mechanisms currently allowed. In each case, NRC or the States will be required to review financial assurance submissions, and the size and scope of self guarantee submissions are not expected to differ significantly from the mechanisms currently allowed.
- 5. IMPLICATIONS FOR OTHER NRC REGULt. TORY FROCRAMS 4 Currently, self-guarantees are not allowed in NRC's financial assurance programs for low-level radioactive waste disposal facilities, uranium recovery facilities, or for power reactors. While much of tne analysis behind the proposed self-guarantee rulemaking may be generally applicable to these other programs, licensees in these programs may also be significantly different from materials licensees in at least three ways:
(1) The decommissioning cost estimates typical of hese licensees may be much higher than is typical of materials 1.censees. Higher 15 Source: ICF calculations.
e cost estimates could alter the optimal balance between public and private costs (2) The number of licensees in these programs is likely to be far smaller that the number of materials licensees. Fewer facilities could alter the balance between public and private costs.
(3) The financial characteristics of these licensees may be very different from those of materials licensees. Different financial characteristics could suggest different financial test criteria and perhaps different baseline failure rates.
Because the present analysis, for the reasons stated above, may not fully apply to NRC's other financial assurance programs, NRC is not proposing a self-guarantee option for these programs at the present time.
e *
- 6. IMPLEMENTATION SCIIEDULE FOR PROPOSED OPTION This action will be implemented immediately or within several months following the passage of the final rulemaking.
REFERENCES ICF Incorporated report, Analysis of Assurance Provided by Current and Proposed Financial Assurance Mechanisms, Draft Report, April 1992.
ICF Incorporated memorandum to Clark Prichard,( TEL from Craig Dean, John Collier, and Rick Nevin, " Responses to Que . ions Raised in Task 6a," August 5, 1992.
4 9
ENCLOSURE 4
' .The Honorable Bob Graham, Chairman Subcommittee on Nuclear Regulation Committee on Environment and Public Works United States Senate Washington, DC 20510 '
Dear Mr. Chairman:
The NRC has sent to the Office of the Federal Reaister for publication the enclosed Federal Register Notice In this notice, the NRC is issuing a proposed rule that would allow self-guarantee as.an additional mechanism for:
complying with the Commission's regulations regarding financial. assurance for- -
decommissioning. The proposed self-guarantee would be limited to NRC licensees that meet stringent financial criteria and would not include electric utility reactor licensees. If promulgated as final, the rule would.
grant a petition for rulemaking (PRM-30-59) submitted by General' Electric Company and Westinghouse Electric Corporation. .
Sincerely, Dennis K. Rathbun,- Director Office of. Congressional Affairs
Enclosure:
A; stated cc: Senator Alan K. Simpson i
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1
- The Honorable Philip R. Sharp, Chairman Subcommittee on Energy and Power Committee-on Energy and-Commerce-United States House of Represent 6t'ves Washington, DC 20515
Dear Mr. Chairman:
The 11RC has sent to the Office of the Federal Reaister for publication the enclosed Federal Register flotice. In this notice, the liRC is issuing a proposed rule that would- allow. self-guarantr 9 as an additional mechanism for complying with the Commission' . regulations regarding financial assurance for decommissioning. The propost self-guarantee would be limited to ilRC licensees that meet stringent financial criteria and would not include electric utility reactor licensees. If promulgated as final, the rule would grant a petition for rulemaking (PRM-30-59) submitted by General Electric Company and Westinghouse Electric Corporation.
Sincerely, Dennis K. Rathbun, Director Office of Congressional Affairs
Enclosure:
As stated cc: Representative Carlos J. Moorhead
.The Honorable Peter H.-Kostmayer,_ Chairman Subcommittee on Energy and the Environment Committee on Interior and Insular Affairs United States House of Representatives Washington, DC 20515
Dear Mr. Chairman:
The NRC has sent to the Office of the Federal Reaister for publication the enclosed Federal Register Notice. In this notice, the NRC is issuing a proposed rule that would allow self-guarantee as an additional mechanism for complying with the Commission's regulations regarding financial assurance for decommissioning. The proposed self-guarantee would be limited to NRC licensees that meet stringent financial criteria and would not include electric utility reactor licensees. If promulgated as final, the rule would grant: a-petition for rulemaking (PRM-30-59): submitted by General Electric Company and Westinghouse Electric Corporation.
Sincerely, l
Dennis K. Rathbun, Director l Office of Congressional Affairs
Enclosure:
As stated cc: Representative John J. Chodes E;J
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i NUCLEAR REG 11LATORY COMMISSION PROPOSED AMENDMENTS TO REGULATIO!!S GOVERNING DECOMMISSIONING FUNDING The 11uclear Regulatory Commission in proposinn to amend its regulations to allow self-guarantee as a means of assuring that adequate funds are available for decomnissioning NRC-licensed nuclear facilities (except nuclear power plants owned by electric utilities). The action is being taken in response to a petition for rulemaking submitted by General Electric Company and Westinghouse Electric Corporation.
The proposed amendments reflect the public comments on the notice of receipt of the petition for rulemaking and would:
permit the use of se?f guaranten if certain requirements are met; these requiraraents would include: tangible net worth of at least $1 billicn; tangible net worth at least 10 times the total current decommissianing cost estimate for all decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent guarantor; assets located in the United States amounting to at least 90 percent of total assets or at least 10 times the total current decommissioning estimate for all decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent guarantor; a current rating for its most recent bond issuance of AAA, AA or A as issued by Standard and Poors (S&P) or Aaa, Aa or A as issued by Moodys.
in addition, the company would have to have at least one class of equity securities registered under the Securities
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- - Exchange'Act of 1934; the company's independent certified public accountant would have to coapare the data used by the company in the financial test 9hich is derived from the independently audited, year-end financial statements for the latest fiscal year 1
, with the amounts in such financial statement; the licensee would ,
have to inform the NRC witiiin 90 -days of any matters coming t01 the attention of the auditor that cause the auditor to believe- ,
that the data specified in the financial test should be adjusted- ,
and that the company no longer passes the financial test; and after the initial financial test, the company would have to repeat passage of the test within 90 days after the close of_each succeeding fiscal year; further, tho guarantee would remain in force unless the licenseo sends notice of cancellation by certified mail to the commission but cancellation could not occur during the 120' days :
following receipt of the notice by the NRC; the: licensee would have to provide alternative financial assurance with 90 days.of; receipt by the NRC of the notice of cancellation; the guarantee and financial test provisions would remain in effect until the Commission has terminated-the license or until another. financial-assurance method acceptable to the NRC has beenLput in effect by
- the licensee; the licensee would have to-promptly-forward to the-NRC and the licensee's independent _ auditor copies of_all current reports filed withlthe Securities and ExchangeICommission
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jL pursuant to-the Securities-and. Exchange.Act'of 19i4;Eand.if, at-J l any_ time,_the licensee's most recent bondEissuance ceases to-be L rated in any_ cat.1ory of A-or above by either S&P or Moodys, the.
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o licensee would have to provide notice in writing to the Commission within 20 days.
Written comments on the proposed amendments to Parts 30, 40, 50, 70 and 72 of the Commission's regulations should be received by (date). They should be addressed to the Secretary of the Commission, Nuclear Regulatory Commission, Washington, D.C.
20555, Attention: Docketing and Service Branch.